2009-08-04 08:30:00 CEST
2009-08-04 08:30:05 CEST
REGULATED INFORMATION
UPM-Kymmene - Interim report (Q1 and Q3)
UPM Interim Report 1 January-30 June 2009
UPM-Kymmene Corporation Interim Report 4 August 2009 at 09:30
UPM Interim Report 1 January-30 June 2009
Earnings per share for the second quarter were EUR -0.02 (0.18), and excluding
special items EUR 0.03 (0.17). Operating profit excluding special items was
EUR 31 million (155 million) and reported operating profit was EUR 8 million
(157 million). Good operating cash flow ensured liquidity and thus the net
interest-bearing liabilities at the end of June came to EUR 4,036 million
(4,479 million). Cost saving measures and temporary layoffs resulted in
a fixed cost reduction of EUR 100 million in the second quarter in
comparison with the same period last year.
Key figures
Q2/ Q2/ Q1-Q2/ Q1-Q2/ Q1-Q4/
2009 2008 2009 2008 2008
Sales, EUR million 1,841 2,378 3,698 4,788 9,461
EBITDA, EUR million 1) 238 313 366 650 1,206
% of sales 12.9 13.2 9.9 13.6 12.7
Operating profit (loss), EUR 8 157 -87 350 24
million
excluding special items, EUR 31 155 -47 343 513
million
% of sales 1.7 6.5 -1.3 7.2 5.4
Profit (loss) before tax, EUR -26 115 -188 249 -201
million
excluding special items, EUR -3 113 -148 242 282
million
Net profit (loss) for the -8 90 -166 193 -180
period, EUR million
Earnings per share, EUR -0.02 0.18 -0.32 0.38 -0.35
excluding special items, EUR 0.03 0.17 -0.24 0.36 0.42
Diluted earnings per share, -0.02 0.18 -0.32 0.38 -0.35
EUR
Return on equity, % neg. 5.5 neg. 5.8 neg.
excluding special items, % 0.8 5.4 neg. 5.6 3.4
Return on capital employed, % 0.4 5.8 neg. 6.2 0.2
excluding special items, % 1.3 5.7 neg. 6.0 4.6
Operating cash flow per 0.59 0.09 1.12 0.19 1.21
share, EUR
Shareholders' equity per 11.08 12.64 11.08 12.64 11.74
share at end of period, EUR
Gearing ratio at end of 70 68 70 68 71
period, %
Net interest-bearing 4,036 4,479 4,036 4,479 4,321
liabilities at end of period,
EUR million
Capital employed at end of 10,294 11,260 10,294 11,260 11,193
period, EUR million
Capital expenditure, EUR 66 137 133 274 551
million
Personnel at end of period 23,792 27,059 23,792 27,059 24,983
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets, excluding the
share of results of associated companies and joint ventures, and special items.
Results
Q2 of 2009 compared with Q2 of 2008
Sales for the second quarter of 2009 were EUR 1,841 million, 23% lower than the
EUR 2,378 million in the second quarter of 2008. Sales decreased due to lower
deliveries across all of UPM's business areas.
Operating profit was EUR 8 million, 0.4% of sales (157 million, 6.6% of sales).
The operating profit excluding special items was EUR 31 million, 1.7% of sales
(155 million, 6.5% of sales). Operating profit includes net restructuring
charges of EUR 23 million as special items.
Operating profit declined clearly from the same period last year. The main
reason for weaker profitability was significantly lower deliveries in all of
UPM's business areas due to lower economic activity.
UPM continued its flexible operating mode in all of its business areas,
adjusting production to the low demand. Due to cost saving measures and
temporary layoffs, the company's fixed costs decreased by EUR 100 million in
comparison to the same period last year.
Wood costs decreased slightly from the comparison period. Energy costs
increased.
The average paper price in euro increased by approximately 1% from the same
period last year. The average price for label materials was clearly higher.
However, timber and plywood prices fell substantially. Overall, the net effect
of sales prices in euro terms across UPM's businesses had a minor negative
impact on profitability.
The increase in the fair value of biological assets net of wood harvested was
EUR 10 million compared to EUR 20 million a year before.
The share of results of associated companies and joint ventures was EUR 22
million negative (21 million positive).
The loss before tax was EUR 26 million (profit of EUR 115 million) and
excluding special items the loss was EUR 3 million (profit of EUR 113 million).
Interest and other finance costs, net, were EUR 37 million (43 million).
Exchange rate and fair value gains and losses resulted in a gain of EUR 3
million (loss of EUR 1 million).
Income taxes were EUR 18 million positive (25 million negative). The impact on
taxes from special items was EUR 3 million positive (1 million negative).
The loss for the second quarter was EUR 8 million (profit of EUR 90 million)
and earnings per share were EUR -0.02 (0.18). Earnings per share excluding
special items were EUR 0.03 (0.17).
January-June of 2009 compared with January-June of 2008
Sales for January-June were EUR 3,698 million, 23% lower than the EUR 4,788
million in the same period in 2008. Sales decreased due to lower deliveries
across all of UPM's business areas.
Operating loss was EUR 87 million, -2.4% of sales (profit of EUR 350 million,
7.3% of sales). The operating loss excluding special items was EUR 47 million,
-1.3% of sales (profit of EUR 343 million, 7.2% of sales). Operating loss
includes charges net of EUR 40 million as special items. UPM sold assets
related to the former Miramichi paper mill in Canada and recorded an income of
EUR 21 million. Restructuring measures resulted into net special charges of
EUR 32 million. The share of the results of associated companies includes
special charges of EUR 29 million.
Operating profit declined clearly from the same period last year. The main
reason for weaker profitability was significantly lower deliveries in all of
UPM's business areas.
UPM responded to lower demand with a flexible way of operating in all of its
business areas, using temporary capacity shutdowns to adjust production to the
low demand. Due to cost saving measures and temporary layoffs, the company's
fixed costs decreased by EUR 170 million in comparison to the same period last
year. This could not, however, compensate for the impact of lower deliveries.
Energy costs increased EUR 60 million from the comparison period. Wood costs
started to decrease during the period. The positive impact on operating profit
was still relatively minor as UPM consumed wood inventories built up in 2008 at
high wood prices.
The average paper price in euro increased by approximately 2% from the same
period last year. The average price for label materials was clearly higher.
However, timber and plywood prices fell substantially. Overall, the net effect
of sales prices in euro terms across UPM's businesses had a minor positive
impact on profitability.
The increase in the fair value of biological assets net of wood harvested was
EUR 21 million compared to EUR 48 million a year before.
The share of results of associated companies and joint ventures was EUR 75
million negative (43 million positive). The result includes special charges of
EUR 29 million from Metsä-Botnia's Kaskinen pulp mill closure.
The loss before tax was EUR 188 million (profit of EUR 249 million) and
excluding special items the loss was EUR 148 million (profit of EUR 242
million). Interest and other finance costs, net, were EUR 95 million (92
million). Exchange rate and fair value gains and losses resulted in a loss of
EUR 6 million (11 million).
Income taxes were EUR 22 million positive (56 million negative). The impact on
taxes from special items was EUR 0 million (1 million negative).
The loss for the period was EUR 166 million (profit of EUR 193 million) and
earnings per share were EUR -0.32 (0.38). Earnings per share excluding special
items were EUR -0.24 (0.36). Operating cash flow per share was EUR 1.12 (0.19).
Financing
In January-June cash flow from operating activities, before capital expenditure
and financing, was EUR 580 million (96 million). Net working capital decreased
by EUR 355 million during the period (increased by EUR 245 million).
The gearing ratio as of 30 June 2009 was 70% (68% on 30 June 2008). Net
interest-bearing liabilities at the end of the period came to EUR 4,036 million
(4,479 million).
In March 2009, UPM replaced the EUR 1.5 billion credit facility that was to
mature in 2010 with a new EUR 825 million credit facility, maturing in 2012.
On 30 June 2009, UPM's cash funds and unused committed credit facilities
totalled EUR 1.7 billion.
Personnel
In January-June, UPM had an average of 24,043 employees (26,274). At the
beginning of the year, the number of employees was 24,983 and at the end of
June it was 23,792. The reduction of 1,191 employees is mostly attributable to
ongoing restructuring.
Capital expenditure
During January-June, capital expenditure was EUR 133 million, 3.6% of sales
(EUR 274 million, 5.7% of sales).
The new renewable energy power plant at the Caledonian mill in Irvine, Scotland
was started in June. The total investment cost was GBP 68 million.
UPM continued its tight investment discipline during the first six months of
2009. Few new investment decisions were made. The largest ongoing project is
now the rebuild of the debarking plant at the Pietarsaari mill in Finland. The
total investment cost is estimated to be EUR 30 million.
Restructuring
In September 2008, UPM announced the plan to close the Kajaani paper mill and
Tervasaari pulp mill, as well as new measures to improve efficiency in all of
the company's business areas and functions. In November 2008, UPM's Label
business area announced restructuring of its European operations.
Mill closures were completed at the end of 2008 and the Label business area
completed most of the planned closures of production lines during the first
half of the year. In Plywood business restructuring continued as processing
operations of Lahti mill were transferred to other plywood mills. In Forest and
timber a plan for closing of Boulogne operations was published.
Restructuring has been a continuous process to improve profitability. Together
with earlier measures the reduction in the number of employees from the same
period last year, excluding seasonal employees, is about 2,160 of which 600 due
to closures of production. The annualised employee related cost savings are
about EUR 110 million.
Shares
UPM shares worth EUR 3,086 million (5,326 million) in total were traded on the
NASDAQ OMX Helsinki stock exchange during January-June of 2009. The highest
quotation was EUR 9.78 in January and the lowest EUR 4.33 in April.
The company's ADSs are traded on the US over-the-counter (OTC) market under a
Level 1 sponsored American Depositary Receipt programme.
The Annual General Meeting held on 25 March 2009 approved a proposal by the
Board of Directors to authorise the Board of Directors to decide on the
buy-back of not more than 51,000,000 own shares. The authorisation is valid for
18 months from the date of the decision.
The Annual General Meeting of 27 March 2007 decided to authorise the Board to
decide on a free issue of shares to the company itself so that the total number
of shares to be issued to the company combined with the number of own shares
bought back under the buy-back authorisation may not exceed 1/10 of the total
number of shares of the company.
In addition, the Board has the authority to decide to issue shares and special
rights entitling the holder to shares of the company. The number of new shares
to be issued, including shares to be obtained under special rights, shall be no
more than 250,000,000. Of that, the maximum number that can be issued to the
company's shareholders based on their pre-emptive rights is 250,000,000 shares
and the maximum amount that can be issued deviating from the shareholders'
pre-emptive rights in a directed share issue is 100,000,000 shares. The maximum
number of new shares to be issued as part of the company's incentive programmes
is 5,000,000. Furthermore, the Board is authorised to decide on the disposal of
own shares. To date, this authorisation has not been used. These authorisations
of the Annual General Meeting 2007 will remain valid for no more than three
years from the date of the decision.
The AGM of 27 March 2007 also decided on granting share options in connection
with the company's share-based incentive plans. In option programmes 2007A,
2007B and 2007C, the total number of share options is no more than 15,000,000
and they will entitle the holders to subscribe for a total of no more than
15,000,000 new shares of the company. Apart from the above, the Board of
Directors has no current authorisation to issue shares, convertible bonds or
share options.
The number of shares entered in the Trade Register on 30 June 2009 was
519,970,088. Through the issuance authorisation and share options, the number
of shares may increase to a maximum of 790,970,088.
At the end of the period, the company held 15,944 of its own shares, or 0.003%
of the total number of shares, which have been granted under the Group's share
reward scheme. These shares have been returned to the company in connection
with the termination of employment contracts.
Litigation and other legal actions
Certain competition authorities are continuing investigations into alleged
antitrust activities with respect to various UPM products. The authorities have
granted UPM conditional full immunity with respect to certain conduct disclosed
to them. UPM has settled or agreed to settle the class-action lawsuits in the
US except for those filed by indirect purchasers of labelstock. The remaining
litigation matters may last several years. No provisions have been made in
relation to these investigations.
In Finland, UPM is participating in the country's fifth nuclear power plant
unit, Olkiluoto 3, through its associated company Pohjolan Voima Oy. Pohjolan
Voima Oy is with 58.12% a majority shareholder of Teollisuuden Voima Oy
(“TVO”). In January 2009, the constructor TVO disclosed information, confirmed
by the plant supplier, consortium AREVA-Siemens, that the construction of the
unit is delayed and the unit is estimated to start up in summer 2012. In June
2009, TVO informed that the arbitration filed in December by AREVA-Siemens,
concerning Olkiluoto 3 delay and related costs amounted to EUR 1.0 billion. In
response, TVO has filed in April 2009 a counter-claim for costs and losses that
TVO is incurring due to the delay and other defaults on the part of the
supplier. The value of TVO's counterclaim is currently approximately EUR 1.4
billion.
Events after the balance sheet date
On 15 July 2009, UPM and Metsäliitto Cooperative signed a letter of intent to
restructure the ownership of the assets of the pulp company Oy Metsä-Botnia Ab
(Botnia). The transaction is subject to a definitive agreement, due diligence,
finalising negotiations with Botnia's lenders and required regulatory
approvals.
In the proposed transaction, UPM would receive Metsäliitto's and Botnia's share
of the Fray Bentos pulp mill and the eucalyptus plantation forestry company
Forestal Oriental in Uruguay, and dispose part of its current 47% ownership in
Botnia. After the transaction, Botnia would consist of its current operations in
Finland and be owned by Metsäliitto 53%, M-real 30% and UPM 17%.
UPM's share of the pulp capacity of Botnia's Finnish mills would decrease from
1.1 million tonnes to 400,000 tonnes. At the same time, UPM would become 91%
owner of the Fray Bentos pulp mill and UPM's share of eucalyptus pulp would
increase by approx. 500,000 tonnes.
In addition, UPM would acquire 1.2% of the energy company Pohjolan Voima Oy
from Botnia.
The proposed transactions are expected to be concluded during the last quarter
of 2009.
Outlook for the second half of 2009
Contraction of economic activity in UPM's main markets has slowed down and
economic indicators show improving consumer confidence. However, recession
continues to have an impact on consumer demand, construction activity, and
advertising in print media and thus on demand for all of UPM's products.
UPM will continue to curtail production in most of its businesses to respond to
the market demand.
UPM's paper deliveries for the second half of 2009 are forecast to be somewhat
higher than during the first half of the year as order intake has improved from
the end of the year 2008. The average price for paper deliveries in euro is
expected to be lower than during the first half of the year.
Demand for self-adhesive labelstock in the main markets is estimated to remain
at current levels and pressure on product prices to continue.
Demand for birch and spruce plywood is forecast to continue at the current low
level for the rest of the year and average price to be somewhat lower than
during the first half of the year.
Compared to the first half of the year, wood and other raw material costs for
the Group are expected to be lower.
Business area reviews
Energy
Q2/ Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q2/
2009 2009 2008 2008 2008 2008 2009
Sales, EUR million 100 136 141 129 103 105 236
EBITDA, EUR million 1) 41 57 76 58 34 39 98
% of sales 41.0 41.9 53.9 45.0 33.0 37.1 41.5
Share of results of -4 -4 -11 -8 -2 -5 -8
associated companies and
joint ventures, EUR million
Depreciation, amortisation -1 -2 -3 -1 -1 -1 -3
and impairment charges, EUR million
Operating profit, EUR million 36 51 62 49 31 33 87
% of sales 36.0 37.5 44.0 38.0 30.1 31.4 36.9
Special items, EUR million - - - - - - -
Operating profit excl. 36 51 62 49 31 33 87
special items, EUR million
% of sales 36.0 37.5 44.0 38.0 30.1 31.4 36.9
Electricity deliveries, 1,999 2,486 2,731 2,653 2,344 2,439 4,485
1,000 MWh
Q1-Q2/ Q1-Q4/
2008 2008
Sales, EUR million 208 478
EBITDA, EUR million 1) 73 207
% of sales 35.1 43.3
Share of results of -7 -26
associated companies and
joint ventures, EUR million
Depreciation, amortisation -2 -6
and impairment charges, EUR million
Operating profit, EUR million 64 175
% of sales 30.8 36.6
Special items, EUR million - -
Operating profit excl. 64 175
special items, EUR million
% of sales 30.8 36.6
Electricity deliveries, 4,783 10,167
1,000 MWh
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
Q2 of 2009 compared with Q2 of 2008
Operating profit excluding special items was EUR 36 million, EUR 5 million
higher than last year (31 million). Sales decreased by 3% to EUR 100 million
(103 million), of which EUR 24 million was external sales (20 million). The
electricity sales volume was 2.0 TWh in the quarter (2.3 TWh).
January-June 2009 compared with January-June 2008
Operating profit excluding special items was EUR 87 million, EUR 23 million
higher than last year (64 million). Sales increased by 13% to EUR 236 million
(208 million), of which EUR 73 million was external sales (35 million).
Internal sales decreased by 6% due to lower energy consumption in the company's
own mills. The electricity sales volume was 4.5 TWh (4.8 TWh).
Profitability improved compared with the same period last year, due to the
higher average electricity sales price. The average electricity sales price
increased by 31% to EUR 43.6/MWh (33.3/MWh). The average cost of procured
electricity increased as the hydropower volume was 17% lower than last year.
Market review
The average electricity price in the Nordic electricity exchange in the first
half of the year was unchanged at EUR 36.1/MWh (36.3/MWh). The consumption of
electricity in the Nordic area decreased due to low industrial activity.
Oil and coal market prices were lower compared to the same period last year.
CO2 emission allowance prices decreased.
The one year forward electricity price in the Nordic electricity exchange
averaged EUR 36.0/MWh in the first half of the year, 34% lower than in the same
period last year (54.4/MWh).
In the first half of the year the Nordic water reservoirs were below the
long-term average.
Pulp
Q2/ Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q2/Q1-Q2/
2009 2009 2008 2008 2008 2008 2009 2008
Sales, EUR million 132 139 200 228 247 269 271 516
EBITDA, EUR million 1) -24 -55 9 38 35 57 -79 92
% of sales -18.2 -39.6 4.5 16.7 14.2 21.2 -29.2 17.8
Share of results of -16 -47 -4 44 20 26 -63 46
associated companies and
joint ventures, EUR million
Depreciation, amortisation -20 -20 -73 -22 -17 -16 -40 -33
and impairment charges, EUR million
Operating profit, EUR´million -60 -122 -76 60 38 67 -182 105
% of sales -45.5 -87.8 -38.0 26.3 15.4 24.9 -67.2 20.3
Special items, EUR million 2) - -29 -59 - - - -29 -
Operating profit excl. -60 -93 -17 60 38 67 -153 105
special items, EUR million
% of sales -45.5 -66.9 -8.5 26.3 15.4 24.9 -56.5 20.3
Pulp deliveries, 1,000 t 391 372 421 480 527 554 763 1,081
Q1-Q4/
2008
Sales, EUR million 944
EBITDA, EUR million 1) 139
% of sales 14.7
Share of results of 86
associated companies and
joint ventures, EUR million
Depreciation, amortisation -128
and impairment charges, EUR million
Operating profit, EUR million 89
% of sales 9.4
Special items, EUR million 2) -59
Operating profit excl. 148
special items, EUR million
% of sales 15.7
Pulp deliveries, 1,000 t 1,982
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) In 2009, special items of EUR 29 million relate to the associated company
Metsä-Botnia's Kaskinen pulp mill closure. In 2008, special items of EUR 59
million relate to the closure of the Tervasaari pulp mill.
Q2 of 2009 compared with Q2 of 2008
Operating loss excluding special items was EUR 60 million (profit of EUR 38
million). The sales of UPM's own pulp mills decreased by 47% to EUR 132 million
(247 million) and deliveries by 26% to 391,000 tonnes (527,000).
The share of results of the associated company Metsä-Botnia was loss of EUR 16
million (profit of EUR 20 million).
January-June 2009 compared with January-June 2008
Operating loss excluding special items was EUR 153 million (profit of EUR 105
million). The sales of UPM's own pulp mills decreased by 47% to EUR 271 million
(516 million) and deliveries by 29% to 763,000 tonnes (1,081,000).
Due to reduced internal consumption the Tervasaari pulp mill closure at the end
of 2008 did not have notable impact on deliveries.
Profitability weakened substantially in comparison with the previous year,
mainly due to the approximately 26% lower average pulp price and lower
deliveries. Wood costs remained at a high level. Chemical pulp inventories
increased slightly from the beginning of the year.
The share of results of the associated company Metsä-Botnia was loss of EUR 63
million (profit of EUR 46 million). The result includes special charges of
EUR 29 million from Metsä-Botnia's Kaskinen mill closure. However, the
utilisation rate of the Uruguay mill has remained high and the result of the
mill slightly positive.
Market review
In the first half of 2009, global chemical market pulp shipments declined from
the comparison period by almost 7%. Chemical pulp producer inventories declined
from the high level of the beginning of the year to a normal level at the end
of the period due to extensive production curtailments and strong demand in
China.
Chemical pulp market prices declined. The average softwood pulp (NBSK) market
price in euro terms, at EUR 445/tonne, was 24% lower than in the same period
last year (EUR 582/tonne). The bottom market price during the period was
EUR 421/tonne. In the end of the period the NBSK market price was EUR 441/
tonne.
The average hardwood pulp (BHKP) market price in euro terms also decreased by
28% from last year to EUR 385/tonne (EUR 531/tonne). The bottom market price
during the period was EUR 352/tonne. In the end of the period the BHKP market
price was EUR 359/ tonne.
Forest and timber
Q2/ Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q2/Q1-Q2/
2009 2009 2008 2008 2008 2008 2009 2008
Sales, EUR million 309 385 419 475 518 508 694 1,026
EBITDA, EUR million 1) -15 -15 -52 -4 4 4 -30 8
% of sales -4.9 -3.9 -12.4 -0.8 0.8 0.8 -4.3 0.8
Change in fair value of 10 11 -2 4 20 28 21 48
biological assets and wood
harvested, EUR million
Share of results of 1 1 -1 - - 1 2 1
associated companies and
joint ventures, EUR million
Depreciation, amortisation -14 -5 -6 -36 -7 -7 -19 -14
and impairment charges, EUR million
Operating profit, EUR million -18 -18 -63 -38 17 25 -36 42
% of sales -5.8 -4.7 -15.0 -8.0 3.3 4.9 -5.2 4.1
Special items, EUR million 2) -8 -10 -2 -33 - -1 -18 -1
Operating profit excl. -10 -8 -61 -5 17 26 -18 43
special items, EUR million
% of sales -3.2 -2.1 -14.6 -1.1 3.3 5.1 -2.6 4.2
Sawn timber deliveries, 1,000 M3 366 363 421 510 628 573 729 1,201
Q1-Q4/
2008
Sales, EUR million 1,920
EBITDA, EUR million 1) -48
% of sales -2.5
Change in fair value of 50
biological assets and wood
harvested, EUR million
Share of results of -
associated companies and
joint ventures, EUR million
Depreciation, amortisation -56
and impairment charges, EUR million
Operating profit, EUR million -59
% of sales -3.1
Special items, EUR million 2) -36
Operating profit excl. -23
special items, EUR million
% of sales -1.2
Sawn timber deliveries, 2,132
1,000 m3
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) Special items for the second quarter of 2009 include impairment charges of
EUR 8 million related to wood procurement operations. In the first quarter of
2009, special items of EUR 10 million relate to the sales loss of Miramichi's
forestry and sawmilling operations' assets. Special items in 2008 include an
impairment charge of EUR 31 million related to fixed assets of the Finnish
sawmills.
Q2 of 2009 compared with Q2 of 2008
Operating loss excluding special items was EUR 10 million (profit of EUR 17
million). Sales declined by 40% to EUR 309 million (518 million). Sawn timber
deliveries decreased by 42% to 366,000 cubic metres (628,000).
The increase in the fair value of biological assets (growing trees) was EUR 14
million (51 million). The cost of wood raw material harvested from the Group's
own forests was EUR 4 million (31 million). The net effect was EUR 10 million
positive (20 million positive).
January-June 2009 compared with January-June 2008
Operating loss excluding special items was EUR 18 million (profit of EUR 43
million). Sales declined by 32% to EUR 694 million (1,026 million). Sawn timber
deliveries decreased by 39% to 729,000 cubic metres (1,201,000).
Profitability weakened from the same period last year, mainly due to the
approximately 16% lower average price of delivered timber goods as well as
lower deliveries.
Wood deliveries to the company's own mills were considerably lower than a year
ago. Despite lower than planned consumption the wood inventories decreased,
however, due to both reduced purchases of wood and loggings from the company's
own forests. At the end of the period company's wood inventory level was closer
to current consumption requirements. Wood costs remained at a high level, due
to consumption of inventories retained in 2008.
The increase in the fair value of biological assets (growing trees) was EUR 35
million (92 million). The cost of wood raw material harvested from the Group's
own forests was EUR 14 million (44 million). The net effect was EUR 21 million
positive (48 million positive).
Market review
During the first half of the year, demand for both redwood and whitewood sawn
timber in Europe declined substantially in comparison with the last year due to
low construction activity. The weak market balance resulted in significantly
lower prices.
Wood purchases in the Finnish wood market were significantly lower compared to
the same period last year. The main reasons for this were the industry's lower
production and high wood inventories.
However, the non-integrated saw mills suffered from log shortages in the second
quarter due to low market supply. Wood prices declined by on average of about
16% compared to the same period in the previous year.
Paper
Q2/ Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q2/
2009 2009 2008 2008 2008 2008 2009
Sales, EUR million 1,388 1,367 1,750 1,761 1,727 1,773 2,755
EBITDA, EUR million 1) 247 187 189 271 216 209 434
% of sales 17.8 13.7 10.8 15.4 12.5 11.8 15.8
Share of results of -1 -1 1 - - - -2
associated companies and
joint ventures, EUR million
Depreciation, amortisation -147 -149 -264 -388 -156 -159 -296
and impairment charges, EUR million
Operating profit, EUR million 85 60 -126 -114 60 51 145
% of sales 6.1 4.4 -7.2 -6.5 3.5 2.9 5.3
Special items, EUR million 2) -10 23 -153 -227 - 1 13
Operating profit excl. 95 37 27 113 60 50 132
special items, EUR million
% of sales 6.8 2.7 1.5 6.4 3.5 2.8 4.8
Deliveries, publication 1,323 1,304 1,809 1,760 1,749 1,772 2,627
papers, 1,000 t
Deliveries, fine and 813 724 784 863 923 981 1,537
speciality papers, 1,000 t
Paper deliveries total, 2,136 2,028 2,593 2,623 2,672 2,753 4,164
1,000 t
Q1-Q2/ Q1-Q4/
2008 2008
Sales, EUR million 3,500 7,011
EBITDA, EUR million 1) 425 885
% of sales 12.1 12.6
Share of results of - 1
associated companies and
joint ventures, EUR million
Depreciation, amortisation -315 -967
and impairment charges, EUR million
Operating profit, EUR million 111 -129
% of sales 3.2 -1.8
Special items, EUR million 2) 1 -379
Operating profit excl. 110 250
special items, EUR million
% of sales 3.1 3.6
Deliveries, publication 3,521 7,090
papers, 1,000 t
Deliveries, fine and 1,904 3,551
speciality papers, 1,000 t
Paper deliveries total, 1,000 t 5,425 10,641
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) Special items for the second quarter of 2009 include charges of EUR 9
million related to personnel reduction in Nordland mill, impairment reversals
of EUR 4 million and other restructuring charges of EUR 5 million. In the first
quarter of 2009, special items include an income of EUR 31 million related to
the
sale of the assets of the former Miramichi paper mill and charges of EUR 8
million related to restructuring measures. In 2008, special items include the
goodwill impairment charge of EUR 230 million, impairment charges of EUR 101
million and other restructuring costs of EUR 42 million related to the closure
of the Kajaani paper mill, and other restructuring costs, net of EUR 6 million.
Q2 of 2009 compared with Q2 of 2008
Operating profit excluding special items was EUR 95 million, EUR 35 million
higher than a year ago (60 million). Sales were EUR 1,388 million (1,727
million). Paper deliveries decreased by 20% to 2,136,000 tonnes (2,672,000).
Paper deliveries for publication papers (magazine papers and newsprint)
decreased by 24% and for fine and speciality papers by 12% from the previous
year.
Profitability improved from the comparison period. Lower deliveries had a
significant negative impact on profitability, but this was offset by lower
fibre costs, mainly for chemical pulp. Fixed costs decreased significantly.
The average price for all paper deliveries when translated into euros was 1%
higher than in the second quarter of 2008.
January-June 2009 compared with January-June 2008
Operating profit excluding special items was EUR 132 million, EUR 22 million
higher than a year ago (110 million). Sales were EUR 2,755 million (3,500
million). Paper deliveries decreased by 23% to 4,164,000 tonnes (5,424,000).
Paper deliveries for publication papers (magazine papers and newsprint)
decreased by 25% and for fine and speciality papers by 19% from the previous
year.
The Kajaani paper mill was closed at the end of 2008. Due to the reduced
demand, the closure had only minor impact on UPM's paper deliveries.
Profitability improved from the corresponding period last year. Lower
deliveries had a significant negative impact on profitability, but this was
offset by lower costs for fibre, mainly for chemical pulp, and reduction in
fixed costs.
The average price for all paper deliveries when translated into euros was 2%
higher than last year.
Market review
In Europe, during the first half of the year, demand for publication papers was
19% lower and for fine papers 19% lower than a year ago. In North America,
demand for publication papers continued to decline and was 28% down from last
year. Demand for fine papers also decreased in Asia, even though it started to
recover during the period under review.
The average market prices in euro area increased, but decreased in the GBP area
when translated into euros due to 15% devaluation of the pound. In Europe, the
average market prices in euros increased by about 3% for magazine papers and by
about 1% for standard newsprint when compared with the first half of 2008. The
average market price increased by 4% for coated fine papers and declined by 7%
for uncoated fine papers in comparison to the previous year.
In North America, the average US dollar prices for magazine papers were 6%
lower compared to the corresponding period a year ago. In Asia, market prices
for fine papers decreased.
Label
Q2/ Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q2/Q1-Q2/
2009 2009 2008 2008 2008 2008 2009 2008
Sales, EUR million 226 223 233 239 245 242 449 487
EBITDA, EUR million 1) 18 6 -1 9 15 11 24 26
% of sales 8.0 2.7 -0.4 3.8 6.1 4.5 5.3 5.3
Depreciation, amortisation -11 -9 -16 -8 -7 -8 -20 -15
and impairment charges, EUR million
Operating profit, EUR million 4 -3 -38 1 8 3 1 11
% of sales 1.8 -1.3 -16.3 0.4 3.3 1.2 0.2 2.3
Special items, EUR million 2) -5 - -28 - - - -5 -
Operating profit excl. 9 -3 -10 1 8 3 6 11
special items, EUR million
% of sales 4.0 -1.3 -4.3 0.4 3.3 1.2 1.3 2.3
Q1-Q4/
2008
Sales, EUR million 959
EBITDA, EUR million 1) 34
% of sales 3.5
Depreciation, amortisation -39
and impairment charges, EUR million
Operating profit, EUR million -26
% of sales -2.7
Special items, EUR million 2) -28
Operating profit excl. 2
special items, EUR million
% of sales 0.2
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) In the second quarter of 2009, special items include impairment charges of
EUR 2 million and other restructuring charges of EUR 3 million. In 2008,
special
items of EUR 28 million relate to measures to reduce coating capacity and close
two slitting terminals in Europe.
Q2 of 2009 compared with Q2 of 2008
Operating profit excluding special items was EUR 9 million (8 million). Sales
were EUR 226 million (245 million).
Profitability improved slightly despite lower deliveries, mainly due to
fixed cost reductions and higher sales prices.
The delivery volumes of self-adhesive label materials declined by close to
15%, remaining roughly at the level of the first quarter. Average prices
converted to euros increased by about 7%.
January-June 2009 compared with January-June 2008
Operating profit excluding special items was EUR 6 million (11 million). Sales
were EUR 449 million (487 million).
Profitability weakened mainly due to lower sales volumes. The delivery volumes
of self-adhesive label materials declined by some 15%, driven by lower economic
activity. Average prices converted to euros increased by about 8%, more than
compensating for higher raw material costs. Fixed costs decreased.
In 2008, UPM Raflatac opened two new labelstock factories; one in Dixon, USA,
in January and another in Wroclaw, Poland, in November. The start-up of both
factories has proceeded according to the plan.
The restructuring of European operations, which was announced in the fourth
quarter of 2008, has proceeded as planned. Most of the capacity closures were
implemented by the end of the second quarter and the programme will be
completed by the end of the year 2009.
Market review
During the first half of the year, demand for self-adhesive label materials
declined in all markets as demand for consumer products and shipments of goods
slowed down. In all markets, demand has now stabilised at the current low level
during the first half of the year.
The market prices in euro terms were higher than in the comparison period. In
local currencies, depending on the region, prices in the second quarter either
increased slightly or were stable compared with the first quarter of 2009.
Plywood Q2/ Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q2/Q1-Q2/
2009 2009 2008 2008 2008 2008 2009 2008
Sales, EUR million 77 75 102 121 150 157 152 307
EBITDA, EUR million 1) -5 -23 -5 3 22 26 -28 48
% of sales -6.5 -30.7 -4.9 2.5 14.7 16.6 -18.4 15.6
Depreciation, amortisation -5 -5 -5 -5 -6 -5 -10 -11
and impairment charges, EUR million
Operating profit, EUR million -10 -29 -10 -2 19 21 -39 40
% of sales -13.0 -38.7 -9.8 -1.7 12.7 13.4 -25.7 13.0
Special items, EUR million 2) - -1 - - 3 - -1 3
Operating profit excl. -10 -28 -10 -2 16 21 -38 37
special items, EUR million
% of sales -13.0 -37.3 -9.8 -1.7 10.7 13.4 -25.0 12.1
Deliveries, plywood, 1,000 m3 141 133 160 188 227 231 274 458
Q1-Q4/
2008
Sales, EUR million 530
EBITDA, EUR million 1) 46
% of sales 8.7
Depreciation, amortisation -21
and impairment charges, EUR million
Operating profit, EUR million 28
% of sales 5.3
Special items, EUR million 2) 3
Operating profit excl. 25
special items, EUR million
% of sales 4.7
Deliveries, plywood, 1,000 m3 806
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) Special items in 2008 include reversals of provisions related to the
disposed Kuopio plywood mill.
Q2 of 2009 compared with Q2 of 2008
Operating loss excluding special items was EUR 10 million (profit of EUR 16
million). Sales decreased by EUR 73 million to EUR 77 million (150 million), as
plywood deliveries declined by 38% to 141,000 cubic metres (227,000).
Plywood reported an operating loss due to significantly lower delivery volumes
and lower sales prices than in the comparison period.
January-June 2009 compared with January-June 2008
Operating loss excluding special items was EUR 38 million (profit of EUR 37
million). Sales halved by EUR 155 million to EUR 152 million (307 million), as
plywood deliveries declined by 40% to 274,000 cubic metres (458,000).
Plywood reported an operating loss due to significantly lower delivery volumes
and lower sales prices than in the comparison period. Significant fixed cost
reductions were implemented throughout the organisation, but these could not
compensate for the adverse impact of deliveries and prices.
Weak market demand led to extensive production downtime at all mills. The
Heinola mill was temporarily shut down from January 2009 onwards. The Kaukas
mill was temporarily shut down from May onwards. UPM announced in April that
operations at the Lahti mill will be moved to other mills by the end of the
year.
At the Kalso veneer mill, a production automation project was completed in May.
As a result, the number of personnel at the mill will be reduced by 53 people.
Market review
In Europe, plywood demand declined substantially from the first half of 2008
due to record low construction activity and demand for engineered end products
in transportation and other industrial end uses. Declining demand in Europe has
left much idle capacity. Inventories have been reduced in all parts of the
supply chain. The market prices have declined.
Other operations
Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q2/
2009 2009 2008 2008 2008 2008 2009
Sales, EUR million 21 34 34 52 66 48 55
EBITDA, EUR million 1) -24 -29 -38 3 -13 -9 -53
% of sales -114.3 -85.3 -111.8 5.8 -19.7 -18.8 -96.4
Share of results of -2 -2 -1 -1 3 - -4
associated companies and
joint ventures, EUR million
Depreciation, amortisation -3 -3 2 -2 -5 -3 -6
and impairment charges, EUR million
Operating profit, EUR million -29 -34 -35 4 -16 -7 -63
% of sales -138.1 -100.0 -102.9 7.7 -24.2 -14.6 -114.5
Special items, EUR million 2) - - 2 4 -1 5 -
Operating profit excl. -29 -34 -37 0 -15 -12 -63
special items, EUR million
% of sales -138.1 -100.0 -108.8 0.0 -22.7 -25.0 -114.5
Q1-Q2/Q1-Q4/
2008 2008
Sales, EUR million 114 200
EBITDA, EUR million 1) -22 -57
% of sales -19.3 -28.5
Share of results of 3 1
associated companies and
joint ventures, EUR million
Depreciation, amortisation -8 -8
and impairment charges, EUR million
Operating profit, EUR million -23 -54
% of sales 20.2 -27.0
Special items, EUR million 2) 4 10
Operating profit excl. -27 -64
special items, EUR million
% of sales -23.7 -32.0
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) In 2008, special items include an adjustment of EUR 5 million to sales of
disposals of 2007 and other restructuring income net of EUR 5 million.
Other operations include development units (the wood plastic composite unit UPM
ProFi, RFID tags and biofuels), logistic services and corporate administration.
Q2 of 2009 compared with Q2 of 2008
Excluding special items, operating loss was EUR 29 million (loss of EUR 15
million). Sales amounted to EUR 21 million (66 million).
The operating loss was greater than in the comparison period, mainly due to
negative hedging results. The development units continued to incur an operating
loss.
January-June 2009 compared with January-June 2008
Excluding special items, operating loss was EUR 63 million (loss of EUR 27
million). Sales amounted to EUR 55 million (114 million).
The operating loss was greater than in the comparison period, mainly due to
negative hedging results. In addition, the development units incurred somewhat
higher losses and costs than last year.
Helsinki, 4 August 2009
UPM-Kymmene Corporation
Board of Directors
Financial information
This Interim Report is unaudited
Consolidated income statement
EUR million Q2/ Q2/ Q1-Q2/ Q1-Q2/ Q1-Q4/
2009 2008 2009 2008 2008
Sales 1,841 2,378 3,698 4,788 9,461
Other operating income 7 11 24 51 83
Costs and expenses -1,627 -2,074 -3,361 -4,182 -8,407
Change in fair value of 10 20 21 48 50
biological assets and wood harvested
Share of results of -22 21 -75 43 62
associated companies and joint ventures
Depreciation, amortisation -201 -199 -394 -398 -1,225
and impairment charges
Operating profit (loss) 8 157 -87 350 24
Gains on available-for-sale - 2 - 2 2
investments, net
Exchange rate and fair value 3 -1 -6 -11 -25
gains and losses
Interest and other finance -37 -43 -95 -92 -202
costs, net
Profit (loss) before tax -26 115 -188 249 -201
Income taxes 18 -25 22 -56 21
Profit (loss) for the period -8 90 -166 193 -180
Attributable to:
Equity holders of the parent -8 92 -166 194 -179
company
Minority interest - -2 - -1 -1
-8 90 -166 193 -180
Earnings per share for profit (loss) attributable to the
equity holders of the parent company
Basic earnings per share, EUR -0.02 0.18 -0.32 0.38 -0.35
Diluted earnings per share, EUR -0.02 0.18 -0.32 0.38 -0.35
Statement of comprehensive income
EUR million Q2/ Q2/Q1-Q2/Q1-Q2/Q1-Q4/
2009 2008 2009 2008 2008
Profit (loss) for the period -8 90 -166 193 -180
Other comprehensive income
for the period, after tax:
Translation differences 37 26 66 -104 -206
Net investment hedge -12 -9 -20 26 56
Cash flow hedges 9 -20 -9 - -33
Share of other comprehensive -12 10 -8 -8 1
income of associated companies
Other comprehensive income 22 7 29 -86 -182
for the period, net of tax
Total comprehensive income 14 97 -137 107 -362
for the period
Total comprehensive income attributable to:
Equity holders of the parent 14 99 -137 108 -361
company
Minority interest - -2 - -1 -1
14 97 -137 107 -362
Condensed consolidated balance sheet
EUR million 30.06.2009 30.06.2008 31.12.2008
ASSETS
Non-current assets
Goodwill 933 1,163 933
Other intangible assets 394 425 403
Property, plant and equipment 5,439 6,007 5,688
Biological assets 1,152 1,138 1,133
Investments in associated 829 1,210 1,263
companies and joint ventures
Deferred tax assets 247 247 258
Other non-current assets 622 398 697
9,616 10,588 10,375
Current assets
Inventories 1,062 1,438 1,354
Trade and other receivables 1,422 1,806 1,710
Cash and cash equivalents 192 103 330
2,676 3,347 3,394
Assets classified as held for sale 327 - 12
Total assets 12,619 13,935 13,781
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent company
Share capital 890 890 890
Fair value and other reserves -132 -76 -165
Reserve for invested 1,145 1,145 1,145
non-restricted equity
Retained earnings 3,860 4,615 4,236
5,763 6,574 6,106
Minority interest 14 11 14
Total equity 5,777 6,585 6,120
Non-current liabilities
Deferred tax liabilities 592 743 658
Non-current interest-bearing 4,003 3,971 4,534
liabilities
Other non-current liabilities 591 584 624
5,186 5,298 5,816
Current liabilities
Current interest-bearing liabilities 514 704 537
Trade and other payables 1,142 1,348 1,291
1,656 2,052 1,828
Liabilities related to assets - - 17
classified as held for sale
Total liabilities 6,842 7,350 7,661
Total equity and liabilities 12,619 13,935 13,781
Condensed consolidated cash flow statement
EUR million Q1-Q2/ Q1-Q2/ Q1-Q4/
2009 2008 2008
Cash flow from operating activities
Profit (loss) for the period -166 193 -180
Adjustments 493 351 1,232
Change in working capital 355 -245 -132
Cash generated from operations 682 299 920
Finance costs, net -85 -118 -216
Income taxes paid -17 -85 -76
Net cash generated from 580 96 628
operating activities
Cash flow from investing activities
Acquisitions and share purchases - -6 -19
Purchases of intangible and -143 -310 -558
tangible assets
Asset sales and other 20 17 45
investing cash flow
Net cash used in investing -123 -299 -532
activities
Cash flow from financing activities
Change in loans and other -387 375 305
financial items
Share options exercised - 78 78
Dividends paid -208 -384 -384
Net cash used in financing -595 69 -1
activities
Change in cash and cash -138 -134 95
equivalents
Cash and cash equivalents at 330 237 237
the beginning of period
Foreign exchange effect on cash - - -2
Change in cash and cash -138 -134 95
equivalents
Cash and cash equivalents at 192 103 330
end of period
Operating cash flow per 1.12 0.19 1.21
share, EUR
Consolidated statement of changes in equity
Attributable to equity holders of the parent
company EUR million Share
Translation Fair value
capital differences and other
reserves
Balance at 1 January 2008 890 -158 193
Changes in equity for 2008
Share options exercised - - -
Share-based compensation, net of tax - - -19
Dividend paid - - -
Business combinations - - -
Total comprehensive income for - -91 -1
the period
Balance at 30 June 2008 890 -249 173
Balance at 1 January 2009 890 -295 130
Changes in equity for 2009
Share-based compensation, net of tax - - 1
Dividend paid - - -
Business combinations - - -
Other items - - -
Total comprehensive income - 41 -9
for the period
Balance at 30 June 2009 890 -254 122
EUR million Reserve for Retained Total
invested earnings
non-restricted
equity
Balance at 1 January 2008 1,067 4,778 6,770
Changes in equity for 2008
Share options exercised 78 - 78
Share-based compensation, net of tax - 21 2
Dividend paid - -384 -384
Business combinations - - -
Total comprehensive income - 200 108
for the period
Balance at 30 June 2008 1,145 4,615 6,574
Balance at 1 January 2009 1,145 4,236 6,106
Changes in equity for 2009
Share-based compensation, net of tax - - 1
Dividend paid - -208 -208
Business combinations - - -
Other items - 1 1
Total comprehensive income - -169 -137
for the period
Balance at 30 June 2009 1,145 3,860 5,763
EUR million Minority Total
interest equity
Balance at 1 January 2008 13 6,783
Changes in equity for 2008
Share options exercised - 78
Share-based compensation, net of tax - 2
Dividend paid - -384
Business combinations -1 -1
Total comprehensive income -1 107
for the period
Balance at 30 June 2008 11 6,585
Balance at 1 January 2009 14 6,120
Changes in equity for 2009
Share-based compensation, net of tax - 1
Dividend paid - -208
Business combinations - -
Other items - 1
Total comprehensive income - -137
for the period
Balance at 30 June 2009 14 5,777
Quarterly information
EUR million Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
2009 2009 2008 2008 2008 2008
Sales 1,841 1,857 2,315 2,358 2,378 2,410
Other operating income 7 17 9 23 11 40
Costs and expenses -1,627 -1,734 -2,227 -1,998 -2,074 -2,108
Change in fair value of 10 11 -2 4 20 28
biological assets and wood harvested
Share of results of associated -22 -53 -16 35 21 22
companies and joint ventures
Depreciation, amortisation -201 -193 -365 -462 -199 -199
and impairment charges
Operating profit (loss) 8 -95 -286 -40 157 193
Gains on available-for-sale - - - - 2 -
investments, net
Exchange rate and fair value 3 -9 -14 - -1 -10
gains and losses
Interest and other finance -37 -58 -60 -50 -43 -49
costs, net
Profit (loss) before tax -26 -162 -360 -90 115 134
Income taxes 18 4 74 3 -25 -31
Profit (loss) for the period -8 -158 -286 -87 90 103
Attributable to:
Equity holders of the parent -8 -158 -287 -86 92 102
company
Minority interest - - 1 -1 -2 1
-8 -158 -286 -87 90 103
Basic earnings per share, EUR -0.02 -0.30 -0.56 -0.17 0.18 0.20
Diluted earnings per share, EUR -0.02 -0.30 -0.56 -0.17 0.18 0.20
Earnings per share, excluding 0.03 -0.27 -0.19 0.25 0.17 0.19
special items, EUR
Average number of shares 519,954 519,954 519,979 519,999 517,622 512,581
basic (1,000)
Average number of shares 519,954 519,954 519,979 519,999 516,791 513,412
diluted (1,000)
Special items in operating -23 -17 -240 -256 2 5
profit (loss)
Operating profit (loss), 31 -78 -46 216 155 188
excl. special items
% of sales 1.7 -4.2 -2.0 9.2 6.5 7.8
Special items before tax -23 -17 -240 -250 2 5
Profit (loss) before tax, -3 -145 -120 160 113 129
excl. special items
% of sales -0.2 -7.8 -5.2 6.8 4.8 5.4
Return on equity, excl. 0.8 neg. neg. 7.8 5.4 5.9
special items, %
Return on capital employed, 1.3 neg. neg. 7.7 5.7 6.5
excl. special items, %
EBITDA 238 128 178 378 313 337
% of sales 12.9 6.9 7.7 16.0 13.2 14.0
Share of results of associated companies and
joint ventures
Energy -4 -4 -11 -8 -2 -5
Pulp -16 -47 -4 44 20 26
Forest and timber 1 1 -1 - - 1
Paper -1 -1 1 - - -
Other operations -2 -2 -1 -1 3 -
Total -22 -53 -16 35 21 22
EUR million Q1-Q2/ Q1-Q2/ Q1-Q4/
2009 2008 2008
Sales 3,698 4,788 9,461
Other operating income 24 51 83
Costs and expenses -3,361 -4,182 -8,407
Change in fair value of 21 48 50
biological assets and wood harvested
Share of results of associated -75 43 62
companies and joint ventures
Depreciation, amortisation -394 -398 -1,225
and impairment charges
Operating profit (loss) -87 350 24
Gains on available-for-sale - 2 2
investments, net
Exchange rate and fair value -6 -11 -25
gains and losses
Interest and other finance -95 -92 -202
costs, net
Profit (loss) before tax -188 249 -201
Income taxes 22 -56 21
Profit (loss) for the period -166 193 -180
Attributable to:
Equity holders of the parent -166 194 -179
company
Minority interest - -1 -1
-166 193 -180
Basic earnings per share, EUR -0.32 0.38 -0.35
Diluted earnings per share, EUR -0.32 0.38 -0.35
Earnings per share, excluding -0.24 0.36 0.42
special items, EUR
Average number of shares 519,954 515,102 517,545
basic (1,000)
Average number of shares 519,954 515,102 517,545
diluted (1,000)
Special items in operating -40 7 -489
profit (loss)
Operating profit (loss), -47 343 513
excl. special items
% of sales -1.3 7.2 5.4
Special items before tax -40 7 -483
Profit (loss) before tax, -148 242 282
excl. special items
% of sales -4.0 5.1 3.0
Return on equity, excl. neg. 5.6 3.4
special items, %
Return on capital employed, neg. 6.0 4.6
excl. special items, %
EBITDA 366 650 1,206
% of sales 9.9 13.6 12.7
Share of results of associated companies and
joint ventures
Energy -8 -7 -26
Pulp -63 46 86
Forest and timber 2 1 -
Paper -2 - 1
Other operations -4 3 1
Total -75 43 62
Deliveries
Q2/ Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q2/
2009 2009 2008 2008 2008 2008 2009
Electricity, 1,000 MWh 1,999 2,486 2,731 2,653 2,344 2,439 4,485
Pulp, 1,000 t 391 372 421 480 527 554 763
Sawn timber, 1,000 m3 366 363 421 510 628 573 729
Publication papers, 1,000 t 1,323 1,304 1,809 1,760 1,749 1,772 2,627
Fine and speciality papers, 813 724 784 863 923 981 1,537
1,000 t
Paper deliveries total, 2,136 2,028 2,593 2,623 2,672 2,753 4,164
1,000 t
Plywood, 1,000 m3 141 133 160 188 227 231 274
Q1-Q2/ Q1-Q4/
2008 2008
Electricity, 1,000 MWh 4,783 10,167
Pulp, 1,000 t 1,081 1,982
Sawn timber, 1,000 m3 1,201 2,132
Publication papers, 1,000 t 3,521 7,090
Fine and speciality papers, 1,904 3,551
1,000 t
Paper deliveries total, 1,000 t 5,425 10,641
Plywood, 1,000 m3 458 806
Quarterly segment information
EUR million Q2/ Q1/ Q4/ Q3/
2009 2009 2008 2008
Sales
Energy 100 136 141 129
Pulp 132 139 200 228
Forest and timber 309 385 419 475
Paper 1,388 1,367 1,750 1,761
Label 226 223 233 239
Plywood 77 75 102 121
Other operations 21 34 34 52
Internal sales -412 -502 -564 -647
Sales, total 1,841 1,857 2,315 2,358
External sales
Energy 24 49 57 45
Pulp 10 10 6 17
Forest and timber 150 152 199 197
Paper 1,355 1,327 1,701 1,699
Label 225 222 233 238
Plywood 73 72 94 111
Other operations 4 25 25 51
External sales, total 1,841 1,857 2,315 2,358
Internal sales
Energy 76 87 84 84
Pulp 122 129 194 211
Forest and timber 159 233 220 278
Paper 33 40 49 62
Label 1 1 - 1
Plywood 4 3 8 10
Other operations 17 9 9 1
Internal sales, total 412 502 564 647
EBITDA
Energy 41 57 76 58
Pulp -24 -55 9 38
Forest and timber -15 -15 -52 -4
Paper 247 187 189 271
Label 18 6 -1 9
Plywood -5 -23 -5 3
Other operations -24 -29 -38 3
EBITDA, total 238 128 178 378
Operating profit (loss)
Energy 36 51 62 49
Pulp -60 -122 -76 60
Forest and timber -18 -18 -63 -38
Paper 85 60 -126 -114
Label 4 -3 -38 1
Plywood -10 -29 -10 -2
Other operations -29 -34 -35 4
Operating profit (loss), total 8 -95 -286 -40
% of sales 0.4 -5.1 -12.4 -1.7
Special items
Energy - - - -
Pulp - -29 -59 -
Forest and timber -8 -10 -2 -33
Paper -10 23 -153 -227
Label -5 - -28 -
Plywood - -1 - -
Other operations - - 2 4
Special items, total -23 -17 -240 -256
Operating profit (loss) excl.special items
Energy 36 51 62 49
Pulp -60 -93 -17 60
Forest and timber -10 -8 -61 -5
Paper 95 37 27 113
Label 9 -3 -10 1
Plywood -10 -28 -10 -2
Other operations -29 -34 -37 -
Operating profit (loss) excl. 31 -78 -46 216
special items, total
% of sales 1.7 -4.2 -2.0 9.2
EUR million Q2/ Q1/ Q1-Q2/ Q1-Q2/ 2008 2008 2009 2008
Sales
Energy 103 105 236 208
Pulp 247 269 271 516
Forest and timber 518 508 694 1,026
Paper 1,727 1,773 2,755 3,500
Label 245 242 449 487
Plywood 150 157 152 307
Other operations 66 48 55 114
Internal sales -678 -692 -914 -1,370
Sales, total 2,378 2,410 3,698 4,788
External sales
Energy 20 15 73 35
Pulp 18 22 20 40
Forest and timber 240 233 302 473
Paper 1,657 1,704 2,682 3,361
Label 244 241 447 485
Plywood 139 147 145 286
Other operations 60 48 29 108
External sales, total 2,378 2,410 3,698 4,788
Internal sales
Energy 83 90 163 173
Pulp 229 247 251 476
Forest and timber 278 275 392 553
Paper 70 69 73 139
Label 1 1 2 2
Plywood 11 10 7 21
Other operations 6 - 26 6
Internal sales, total 678 692 914 1,370
EBITDA
Energy 34 39 98 73
Pulp 35 57 -79 92
Forest and timber 4 4 -30 8
Paper 216 209 434 425
Label 15 11 24 26
Plywood 22 26 -28 48
Other operations -13 -9 -53 -22
EBITDA, total 313 337 366 650
Operating profit (loss)
Energy 31 33 87 64
Pulp 38 67 -182 105
Forest and timber 17 25 -36 42
Paper 60 51 145 111
Label 8 3 1 11
Plywood 19 21 -39 40
Other operations -16 -7 -63 -23
Operating profit (loss), 157 193 -87 350
total
% of sales 6.6 8.0 -2.4 7.3
Special items
Energy - - - -
Pulp - - -29 -
Forest and timber - -1 -18 -1
Paper - 1 13 1
Label - - -5 -
Plywood 3 - -1 3
Other operations -1 5 - 4
Special items, total 2 5 -40 7
Operating profit (loss) excl.special items
Energy 31 33 87 64
Pulp 38 67 -153 105
Forest and timber 17 26 -18 43
Paper 60 50 132 110
Label 8 3 6 11
Plywood 16 21 -38 37
Other operations -15 -12 -63 -27
Operating profit (loss) excl. 155 188 -47 343
special items, total
% of sales 6.5 7.8 -1.3 7.2
EUR million Q1-Q4/
2008
Sales
Energy 478
Pulp 944
Forest and timber 1,920
Paper 7,011
Label 959
Plywood 530
Other operations 200
Internal sales -2,581
Sales, total 9,461
External sales
Energy 137
Pulp 63
Forest and timber 869
Paper 6,761
Label 956
Plywood 491
Other operations 184
External sales, total 9,461
Internal sales
Energy 341
Pulp 881
Forest and timber 1,051
Paper 250
Label 3
Plywood 39
Other operations 16
Internal sales, total 2,581
EBITDA
Energy 207
Pulp 139
Forest and timber -48
Paper 885
Label 34
Plywood 46
Other operations -57
EBITDA, total 1,206
Operating profit (loss)
Energy 175
Pulp 89
Forest and timber -59
Paper -129
Label -26
Plywood 28
Other operations -54
Operating profit (loss), 24
total
% of sales 0.3
Special items
Energy -
Pulp -59
Forest and timber -36
Paper -379
Label -28
Plywood 3
Other operations 10
Special items, total -489
Operating profit (loss) excl.special items
Energy 175
Pulp 148
Forest and timber -23
Paper 250
Label 2
Plywood 25
Other operations -64
Operating profit (loss) excl. 513
special items, total
% of sales 5.4
Changes in property, plant and equipment
EUR million Q1-Q2/Q1-Q2/Q1-Q4/
2009 2008 2008
Book value at beginning of 5,688 6,179 6,179
period
Capital expenditure 109 262 471
Decreases -11 -6 -24
Depreciation -358 -356 -748
Impairment charges -7 - -182
Impairment reversals 4 - -
Translation difference and 14 -63 -8
other changes
Book value at end of period 5,439 6,007 5,688
Commitments and contingencies
EUR million 30.06.2009 30.06.2008 31.12.2008
Own commitments
Mortgages 1) 765 89 787
On behalf of associated companies and
joint ventures
Guarantees for loans 9 10 10
On behalf of others
Other guarantees 1 3 2
Other own commitments
Leasing commitments for the 20 23 17
next 12 months
Leasing commitments for 58 88 56
subsequent periods
Other commitments 65 65 62
1) Mortgages relate mainly to giving mandatory security for borrowing from
Finnish pension insurance companies.
Capital commitments
EUR million Completion Total cost By 31.12.
2008
Rebuild of debarking plant, October 2010 30 1
Pietarsaari
Waste water treatment plant, September 2010 19 -
Blandin
Power plant rebuild, December 2011 12 -
Schongau
Efficiency improvement, September 2009 9 -
Chudovo
Fibre line improvement, December 2011 10 3
Blandin
EUR million Q1-Q2/ After
2009 30.06.
2009
Rebuild of debarking plant, 3 26
Pietarsaari
Waste water treatment plant, - 19
Blandin
Power plant rebuild, - 12
Schongau
Efficiency improvement, 3 6
Chudovo
Fibre line improvement, 2 5
Blandin
Notional amounts of derivative financial instruments
EUR million 30.06.2009 30.06.2008 31.12.2008
Currency derivatives
Forward contracts 4,049 6,621 4,598
Options, bought 20 40 -
Options, written 25 45 -
Swaps 522 502 508
Interest rate derivatives
Forward contracts 2,206 3,511 2,668
Swaps 2,996 2,130 2,833
Other derivatives
Forward contracts 164 28 172
Options, bought 78 - -
Options, written 78 - 78
Swaps 6 5 8
Related party (associated companies and joint ventures)
transactions and balances
EUR million Q1-Q2/Q1-Q2/Q1-Q4/
2009 2008 2008
Sales to associated companies 54 67 138
Purchases from associated 229 263 592
companies
Non-current receivables at 2 - -
end of period
Trade and other receivables 22 29 37
at end of period
Trade and other payables at 28 22 27
end of period
Basis of preparation
This unaudited financial report has been prepared in accordance with the
accounting policies set out in International Accounting Standard 34 on Interim
Financial Reporting and in the Group's Consolidated Financial Statements for
2008. Income tax expense is recognised based on the best estimate of the
weighted average annual income tax rate expected for the full financial year.
The Group has adopted the following standard:
IAS 1 (Revised) Presentation of Financial Statements became effective 1 January
2009. The revised standard prohibits the presentation of items of income and
expenses (that is, ‘non-owner changes in equity') in the statement of changes
in equity, requiring ‘non-owner changes in equity' to be presented separately
from owner changes in equity. Entities can choose whether to present one
performance statement (the statement of comprehensive income) or two statements
(the income statement and statement of comprehensive income). Where entities
restate or reclassify comparative information, they will be required to present
a restated balance sheet as at the beginning comparative period in addition to
the current requirement to present balance sheets at the end of the current
period and comparative period. Following the adoption of the revised standard
the Group will present two separate statements (a separate income statement
followed by a statement of comprehensive income).
Calculation of key indicators
Return on equity, %:
(Profit before tax - income taxes) / Total equity (average) x 100
Return on capital employed, %:
(Profit before tax + interest expenses and other financial expenses) /
(Total equity + interest-bearing liabilities (average)) x 100
Earnings per share:
Profit for the period attributable to equity holders of the parent company /
Adjusted average number of shares during the period excluding treasury shares
Key exchange rates for 30.06.2009 31.03.2009 31.12.2008
the euro at end of period
USD 1.4134 1.3308 1.3917
CAD 1.6275 1.6685 1.6998
JPY 135.51 131.17 126.14
GBP 0.8521 0.9308 0.9525
SEK 10.8125 10.9400 10.8700
Key exchange rates for 30.09.2008 30.06.2008 31.03.2008
the euro at end of period
USD 1.4303 1.5764 1.5812
CAD 1.4961 1.5942 1.6226
JPY 150.47 166.44 157.37
GBP 0.7903 0.7923 0.7958
SEK 9.7943 9.4703 9.3970
It should be noted that certain statements herein, which are not historical
facts, including, without limitation, those regarding expectations for market
growth and developments; expectations for growth and profitability; and
statements preceded by “believes”, “expects”, “anticipates”, “foresees”, or
similar expressions, are forward-looking statements. Since these statements are
based on current plans, estimates and projections, they involve risks and
uncertainties which may cause actual results to materially differ from those
expressed in such forward-looking statements. Such factors include, but are not
limited to: (1) operating factors such as continued success of manufacturing
activities and the achievement of efficiencies therein including the
availability and cost of production inputs, continued success of product
development, acceptance of new products or services by the Group's targeted
customers, success of the existing and future collaboration arrangements,
changes in business strategy or development plans or targets, changes in the
degree of protection created by the Group's patents and other intellectual
property rights, the availability of capital on acceptable terms; (2) industry
conditions, such as strength of product demand, intensity of competition,
prevailing and future global market prices for the Group's products and the
pricing pressures thereto, financial condition of the customers and the
competitors of the Group, the potential introduction of competing products and
technologies by competitors; and (3) general economic conditions, such as rates
of economic growth in the Group's principal geographic markets or fluctuations
in exchange and interest rates. For more detailed information about risk
factors, see pages 71-73 of the company's annual report 2008.
UPM-Kymmene Corporation
Pirkko Harrela
Executive Vice President, Corporate Communications
UPM, Corporate Communications
Media Desk, tel. +358 40 588 3284
communications@upm-kymmene.com
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